We're Interested To See How Apogee Therapeutics (NASDAQ:APGE) Uses Its Cash Hoard To Grow

We can readily understand why investors are attracted to unprofitable companies. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So should Apogee Therapeutics (NASDAQ:APGE) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

See our latest analysis for Apogee Therapeutics

When Might Apogee Therapeutics Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. As at September 2023, Apogee Therapeutics had cash of US$423m and no debt. Looking at the last year, the company burnt through US$56m. That means it had a cash runway of about 7.6 years as of September 2023. While this is only one measure of its cash burn situation, it certainly gives us the impression that holders have nothing to worry about. You can see how its cash balance has changed over time in the image below.

How Easily Can Apogee Therapeutics Raise Cash?

Companies can raise capital through either debt or equity. One of the main advantages held by publicly listed companies is that they can sell shares to investors to raise cash and fund growth. By comparing a company's annual cash burn to its total market capitalisation, we can estimate roughly how many shares it would have to issue in order to run the company for another year (at the same burn rate).

Apogee Therapeutics has a market capitalisation of US$2.1b and burnt through US$56m last year, which is 2.6% of the company's market value. So it could almost certainly just borrow a little to fund another year's growth, or else easily raise the cash by issuing a few shares.

So, Should We Worry About Apogee Therapeutics' Cash Burn?

Given it's an early stage company, we don't have a lot of data with which to judge Apogee Therapeutics' cash burn. We would undoubtedly be more comfortable if it had reported some operating revenue. However, it is fair to say that its cash runway gave us comfort. Overall, we think its cash burn seems perfectly reasonable, and we are not concerned by it. Separately, we looked at different risks affecting the company and spotted 3 warning signs for Apogee Therapeutics (of which 2 are potentially serious!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies insiders are buying, and this list of stocks growth stocks (according to analyst forecasts)

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.